The American trade deficit vis-à-vis China is rising,, despite or because of the ongoing trade war.
Two factors appear to be driving this development: a) the ongoing trade war and b) strong economic growth in the US.
US Commerce Department reported on Wednesday on the widening of the US trade deficit from $45.7bn in June to $50.1bn in July. Specifically for exports to China, the trade deficit surged by 10%, reaching in July an all-time record of $36.8bn.
The trade deficit widened vis-à-vis the EU and North American Free Trade Agreement partners (Canada and Mexico).
Washington’s punitive duties on China on $50bn worth of goods this summer could escalate to $200bn by the end of this week.
Thus far, this resulted in the sharp drop of US exports to China, most prominently of soybeans. US farmers exported 16% less to China, month on month.
In April, soybean farmers tried to frontload export volumes in anticipation of punitive measures.
The surge of the deficit in July could also reflect a strategy of stockpiling in anticipation of US import tariffs, DW reports. Thousands of US companies have production units in China that are disrupted by the ongoing trade war.
However, the rise in the overall trade deficit is also driven by growth.
Economists project that the widening of the trade deficit may hold back growth projections for the US economy. However, at the moment the economy is outperforming growth projections, reaching 4,2% in the second quarter.